Field of the Invention
This invention relates to electronic trading of intellectual property, and more specifically to a method, system and computer program product for limiting supply of electronically transferable instances of works of intellectual property.
Description of the Related Art
Transactions on the Internet involve countless number of goods and services and various creative ways of trading, buying, selling, reselling, as well as exchanging them for valuable consideration such as for example: money, money equivalents, such as stocks bonds etc., and other goods or services, etc.
Original works of authorship, also called “works”, and embodiments of said works in any reproducible medium of expression, also known as instances, have been a vivid subject of electronic commerce and particularly Internet commerce. Some works involved in electronic commerce include works protected under U.S. Code Title 17 copyright laws, and copyright laws of other counties, and particularly works fixated in a tangible medium of expression, from which they can be reproduced.
Digital copies of these works are sold across the Internet through a variety of retail websites and online trading platforms finding popular appeal such as iTunes®. Because digital copies of intellectual property are so easily reproduced, supply has outweighed demand.
There exists no means in the art of limiting supply and output levels with a view for maximizing profitability, or of forcing the market, to evaluate and determine the commercial viability of new artistic works which have yet to be marketed independently of the larger studios, publishing houses and record labels. A number of record stores have emerged in response to increased instances of digital intellectual property available online, but none seek to limit supply.
There are various types of works and various types of instances that may not be electronically transferable as well as various forms of electronic commerce suitable to each work, instance or group of works or instances. Whether a work or an instance is or isn't electronically transferable may influence the methods of electronic commerce applicable to the work.
For example, in some cases a work can be fixed in a medium of expression in such a way that it is inseparable from the medium in which it is expressed and the medium becomes an integral part of the instance and any alteration, separation or destruction of the medium may affect the artistic, esthetic or monetary value of the instance, for example a first and original oil painting, such as Harlequin Musician by Pablo Picasso, or Mona Lisa by Leonardo da Vinci. These are works instantiated in a medium in such a way that the medium becomes an integral part of the instance and uniquely contributes to the character and nature of the instance thus affecting its artistic and esthetic perception and monetary value. Such instances cannot be reproduced by any known technology in such a way that the reproduction is indistinguishable from the original instance.
In other cases an instance of a work may not be electronically transferable because such transfer is unlawful, even though it may be technologically possible. Some works are not electronically transferable because they are embodied or instantiated in a physical container, also called medium, wherein such embodiment or instantiation was meant to be transferred only with the physical container or medium. Many consumer entertainment products such as Compact Disk (CD) products, Digital Video Disk (DVD) products, audio tape products, video cassette products, etcetera, contain instances of works that are not electronically transferable, because the law expressly prohibits such electronic extraction, transfer, transmission, sales or distribution, without the original container.
Additionally, many such consumer products comprise more than one instantiated work, for example a graphic work, recording work, packaging work, producer's work, songwriter's work, composer's work, etc., wherein each work uniquely contributes to the value of the product and is meant to be sold and used together with the whole entertainment product and not electronically extracted by the consumer and then transferred, sold or distributed as separate electronically extracted piece, without the original container (medium). Furthermore such unauthorized or illegal removal, or extraction and electronic transfer, is often punishable under the law and sometimes technologically prevented by application of copy protection technologies.
There are however other ways of instantiation a work where a medium of expression does not substantially affect the artistic, esthetic or monetary value of the instance. For example an original digital sound recording can be stored on many different types of digital medium without affecting the artistic, esthetic or monetary value of each instance as long as all the types of medium used to instantiate the sound recording offer the same or substantially similar quality of perception or reproduction.
Moreover it is possible to create copies of such instance, where the copies, for all practical purposes, are indistinguishable or virtually indistinguishable from one another and from the original.
The instances of works that are a subject of commerce can be divided into two general categories:
Category I.
Instances of works that cannot be transferred electronically and therefore are not transferable over an electronic network such as for example: sculptures in bronze, in iron, in plaster, in clay, in wood, etcetera, paintings or drawings on fabric, on wood, on glass, on walls, on metal, etcetera, writing or engraving on paper, on stone, on metal, on wood on concrete, and the like, or other works embodied in, or made of physical substance or material that cannot be transferred electronically according to the current state of the art.
Some aspects of such not-electronically transferrable instances of works may be however transferred electronically with use of certain technological means; for example, while an oil painting with its canvas and paint matter may not be electronically transferable, an authorized digital photograph of said painting may be electronically transferable Other examples of not electronically transferable instances of works pertain to works embodied or instantiated in a physical container, also called medium, wherein the works are meant to be sold, transferred and distributed with that physical container (medium). Examples of such not electronically transferable instances are Compact Disk (CD) products, Digital Video Disk (DVD) products, audio tape products, video cassette products, and the like. It shall be noted that even if an instance of a work is not electronically transferable it may be possible in some cases to electronically transfer an ownership of said instance.
Category II.
Instances of works that can be transferred electronically in analog or digital form, wherein such transfer is technologically possible and lawful, include: audio-visual works either, pre-recorded, or otherwise embodied in an electronically readable medium, or transmitted live and simultaneously recorded or embodied in an electronically readable medium, for example: video, motion pictures, television programs, interviews, documentaries, news, audio-visual motivational programs, audiovisual kids entertainment, electronic video art, video of dramatic performances, video of pantomime performances, video footage of non-electronically-transferable-works, video footage of performance of non-electronically-transferable-works, and the like; audio and sound recordings either pre-recorded or otherwise embodied in an electronically readable medium, or transmitted live and simultaneously recorded or embodied in an electronically readable medium such as for example: sounds, songs in various genres, symphonies, sonatas, concertos, audio documentaries, radio programs, interviews, news, concert performances, news, audio-books, motivational materials, kids entertainment, audio-samples, electronic audio art, other sound recordings, sounds emitted by non-electronically-transferable-works, sounds of performance of nonelectronically-transferable-works, and the like; literary works embodied in an electronically readable medium, for example: books, articles, letters, literature, technical writings, editorials, testimonials, interviews, news, scientific writings, programmer's expressions of original ideas such as computer programs, catalogs, directories, images, pictorial and graphic works embodied in an electronically readable medium for example: photographs, electronic reproductions of paintings and drawings, electronic art, graphics, technical plans and drawings, architectural plans, reproductions, maps, charts, graphical works of applied art, and the like; other works recorded, stored or contained in a computer file, transmitted live and simultaneously recorded, or otherwise embodied in an electronically readable medium for example: computer graphics, computer animation works, data or other forms of programmer's expressions of original ideas, emails and electronic communications, interactive data, musical works including any accompanying words, dramatic works including any accompanying music, digitally altered video, digitally altered audio, digitally altered photographs, real time and delayed forms of original or derivative electronic art, real time or delayed text materials, images or other digital works, ringtones for cellular devices, copyrighted materials, text with graphics, works of electronic art, compilation works, collective works, joint works, transmitted and recorded aspects of non-electronically-transferable works, transmitted and recorded aspects of nonelectronically-transferable performances, narrated pictures, video with accompanying audio, animation video with audio, pictures with audio, computer graphics with audio etc.
Commercially viable works are often embodied in a medium. Some works are often embodied in multiple copies or are embodied in a single copy and then duplicated, replicated, reprinted, or otherwise copied or multiplied by creating multiple embodiments in a medium or mediums, wherein a single or multiple instances of said work may be embodied in one medium or various types of medium. Each occurrence of a work, stored, recorded, written, or otherwise embodied in any medium, from which it can be reproduced, shall be considered an instance of the work whether a single or multiple occurrences exist on, or in a single medium. For example if a medium such as computer readable hard disk contains 25 files, wherein each file has the same or essentially (substantially) the same content and such content is a work, than there are 25 instances of the work stored on this medium, even though such computer files may substantially differ as to their names, placement on a medium, format, size or bit resolution, etc., as long as they contain the same work, they are all instances of that work; another example: a re-writable optical disk that has two different tracks each containing the same work shall be considered as having two instances of said work, consequently ten of said compact disks each having two occurrences of the work shall be deemed to contain collectively 20 instances of the work, etc., (the counts of instances used in these examples are arbitrary and are used for illustrative purposes only, the actual number of instances on a medium may be higher, equal or lower than the count used in the examples).
In most cases, if an original instance is electronically transferrable then many of its copies or multiplied instances can relatively easily and inexpensively be made as almost indistinguishable or indistinguishable from the original. This is not true for instances of works that cannot be transferred electronically in which the original instance of work that is not electronically transferable is also distinguishable from its copies. In fact in most cases it is difficult and relatively expensive to make an indistinguishable or almost indistinguishable copy of such non-electronically transferable instance of work.
The ease of copying or otherwise multiplying of electronically transferable instances of works is one of the factors being frequently exploited by those involved in illegal exploitation of electronically transferable instances of works.
The situation is so wide spread that even some companies openly and illegally exploit electronically transferable works on a mass scale. The successful lawsuits against Napster, Kazaa etc., have underscored the illegality of unauthorized file swapping, and other offerings of copyrighted instances of works. And the losses of revenue due to electronic piracy are estimated in billions of dollars per year. According to estimates by RIM in 2003 music industry was losing $4.2 billion per year due to piracy. The report prepared in by IFPI estimates that in 2005 illegally downloaded songs in 10 major world markets amounted to 20 billion units. The electronic piracy and Internet piracy in particular are one of the most rampant ways of illegally exploiting instances of works. A legal exploitation of instances of electronically transferable works, involves various forms of retail sales or subscription. There are two main ways of conducting electronic commerce and legally exploiting electronically transferable instances of works.
One way of conducting electronic commerce in respect to electronically transferable instances of works can be described as a form of retail sales where a copyright owner or an authorized agent sells electronically transferable instances of works to consumers at a predetermined price per unit. Normally the consumers who purchased an instance of electronically transferable work such as for example: downloadable song, video, electronic book, and the like, are not allowed to sell it without a special permission. Such permission in most cases has to be obtained in writing and has to be negotiated on an individual basis with the owner of the copyrights or an authorized agent.
Another way of conducting electronic commerce with respect to electronically transferable instances of works can be described as a form of subscription where a copyright owner or an authorized agent offers to the consumer a subscription to a repository containing electronically transferable instances of works where the subscriber has certain rights, such as for example right to download or otherwise use in a predetermined way, electronically transferable instances of works, etcetera. Such predetermined ways comprise: downloading a predetermined number of instances within a time period, downloading unlimited number of instances within a subscription period, listening, playing or other forms of rendering of instances where the quantity of the rendered instances is either limited or unlimited within the subscription period, etcetera.
Currently, all the industry leaders involved in commerce of electronically transferable instances of music and video for example: iTunes, YouTube, Napster, Movielink, Rhapsody essentially practice either some form of retail sales or some form of subscription. In either case a consumer or subscriber is not permitted to resale the items that he purchased or subscribed to.
According to the US law, and laws of several other countries, owners of copyrights, at their own discretion, can create as many copies of instances of their works as they feel like. Even the so called “limited editions” of paintings or sculptures, etc. do not restrict the general ability of the copyright owner to make other copies of the original instance of work as long as they are somehow differentiated from the so called limited edition. Often such differentiation comes only as a different name or different form of packaging, or lack of consecutive numbering or signature of the creator, while the other essential aspects of a work being copied are often unchanged. The so called limited editions often have only limited enforceability under civil law or sometimes under the laws of false and misleading advertising and in many cases are not enforceable at all due to the fact that the contract between the buyer and the seller is often implied, rather than explicitly executed in writing.
The current legal ways of exploiting copies, or multiplied instances of some works are generally practiced with the intent of fully satisfying the market demand for such copies or multiplied instances. Reproductions of paintings, CDs, DVDs, audio tapes, video tapes, and the like are sold in the largest possible quantities and the copyright owners and their agents take pride in the quantities of units sold. There are even ratings and awards, which are highly regarded in the music and film industry, and are mainly based on quantity of units sold, for example: Billboard® charts for “Top CD sales” and “Top DVD sales, awards granted by Record Industry Association of America® (RIM) such as Gold® record. Platinum® record. MultiPlatinum® award, Diamond® award, Digital Gold™ award, are based on the numbers of units sold. This also applies to various other charts, classifications and awards granted by various organizations throughout the world.
The focus on selling maximum number of units may have impaired the industry's ability to exploit instances of works in other ways, namely trading on trading exchanges. In most cases trading of any units on a trading exchange is governed by rules of supply and demand and an increase in quantity of traded units usually adversely affects the value of an item being traded.
Another way of exploiting instances of works is practiced by auction houses. Many auction houses such as Bonhams, Christie's, Sotheby's, etc. have been well known to auction off original instances of works such as paintings, sculptures, etc. as well as copies of instances of works such as prints, reproductions, copies of sculptures, etc. Some online auction houses are also known to auction off digital downloads such as music or text files and in many cases, despite the auction house policies, such activities are illegal due to the fact that the material being auctioned off is offered without the permission or knowledge of the copyright owner. The legal auctions involving electronically transferable instances of works such as downloadable music, video, documents, etc., can be divided into four general categories:
I. Auctions of Items in Public Domain
Auctions of legally owned copyrighted material where such copyright is forfeited in the process of auctioning due to not affixing the copyright notices and providing the initially copyrighted material for unrestricted public use. Auctions of legally owned copyrighted material where the material is legally offered for sale but the buyer is not permitted to subsequently resale such material. Others, such as for example various combinations of the above, auctions with option to “buy now”, etc. Even though, a bidding process occurring during an auction may be affected by the forces of supply and demand, the auctions function on different principles than trading exchanges, such as for example stock or commodity exchanges, etc. Items submitted for sale by an auction house are individually valuated on per-auction-basis involving condition, age, appraisal, previous ownership or other factors associated with each individual auctioned item. In contrast on a trading exchange, buyers are not bidding on an individual offering of a stock by a particular buyer but rather making a general offer to purchase a stock from any buyer who can meet their price and quantity requirements. This is particularly important on electronic exchanges where transactions are performed automatically as soon as the supply meets the demand and in most cases buyers do not know or care which seller supplied which item. No attention is being paid to the age, previous ownership or ware and tare of the shares of stock as all of them are considered to be directly interchangeable and are deemed to be of equal value as long as they belong to the same class. For example, on a stock exchange, a buyer wishing to purchase shares of stock of IBM generally doesn't care which seller supplies the shares as long as the price and quantity are favorable to the buyer. This is because all the units of IBM stock of the same class offered on a stock exchange are considered to be identical in quality and in most cases the buyer doesn't even know who the seller is. Another difference is that during an auction the auction house treats each auction separate and classifies the items offered at such auctions as clearly distinguishable from those offered at different auctions even if they happened to be identical in age, the and character. In contrast the trading exchange treats all the items of the same kind as identical in type and character without any distinction, other than the selling price, and classifies all of them under a common symbol such as, for example, IBM, which describes any and all shares of IBM common stock offered by any and all sellers and buyers trading on a trading exchange without regards to who offers them for sale, at what price or during which trading transaction. Yet another factor distinguishing the auction houses from trading exchanges is that the auction houses, and in particular electronic auction houses such as eBay, do not discern the scarce and non scarce items and in fact they offer a large quantity of items that are not scarce and generally available in retail stores and are offered them at a fixed and often very low prices and in quantities sufficient to saturate the market and fulfil fulfill the demand. In most cases the electronic auction houses make no guaranty whatsoever as to the scarcity or authenticity of the items being offered and the entire burden of making such a recognition is left to the buyer who therefore sometimes falls as a victim of unscrupulous sellers. In contrast trading exchanges have highly enforceable and secure trading systems offering for trade only certified, traceable and scarce issues of stocks or commodities by sellers that are certified or licensed to conduct such transactions and where such transactions are strictly enforced by the state and federal law and ensured by the trading exchange as to their accuracy, correct accounting and transparency. Yet additional factor associated with auctions is a need for constant advertising in order to inform the potential buyers about constantly changing items being offered. This factor limits the forces of supply and demand only to the people informed about the items being offered at any given time, and if the auction house, or an offering party, fails to adequately advertise then the balance of buyers and sellers may be severely disturbed and thus upset the real demand for this item. In contrast, if a trading exchange offers an new item for sale, such as for example shares of stock of a company, then in most cases, subsequently, such an item will be listed on the trading exchange and being continuously offered in substantially or entirely unchanged form, and therefore there is no need for subsequent advertising. A trading exchange may need to advertise only the first offering of an item sometimes called an “initial public offering” (IPO) and then subsequently refrain from advertising altogether without impacting the market valuation of the item. Even if the trading exchange or an offering party fails to adequately advertise the initial public offering of an item, any imbalance caused by such insufficient or excessive advertising is usually quickly corrected during the ongoing day-to-day trading.
As of the time of this writing and according to the best knowledge of the inventor, there is no trading exchange, system, outlet or method for trading or investing in instances of electronically transferable works in a manner similar to trading on a stock or commodity exchange. One of the reasons for this situation is the fact that there is no scarcity of instances of electronically transferable works because of the unrestricted, legally protected ability of the copyright owners to copy or otherwise multiply instances of works at their discretion. The low cost and ease of copying or otherwise multiplying electronically transferable instances of works and the potential for making copies that are indistinguishable from the originals, create the public perception of low or even null value of electronic instances of works. Furthermore there are no known and commonly practiced methods of establishing a balance of supply and demand of electronically transferable instances of works in a trading market. Another unresolved problem that inhibits establishing of trading exchanges of instances of works, is a fact that upon a sale of an electronically transferable instance of a work the new owner of said instance may illegally copy or multiply it, and then in turn flood the market with such copies and upset the balance of supply and demand and thus upset or even destroy altogether the entire trading system of electronically transferable instances of works. There are currently no issuers of instances of works with the purpose of trading said instances on a trading exchange or in a market where supply of such instances would be limited in quantity. And no person or entity currently allows the buyers to legally resale electronically transferable instances of works in an organized market such as for example trading exchange, etc. Also issuing legally or financially enforceable public statements about the acts of limiting quantity of instances of works are not being commonly practiced by the outlets selling electronically downloadable instances of works. Furthermore a predetermined, flat or fixed prices such as for example those adopted by iTunes and many others, at $0.99 per song, severely inhibit the mechanisms of supply and demand and are directly contrary to general concept of trading on a trading exchange. Subscription approach such as this practiced by Napster or Rhapsody is also contrary to market trading since no value is being attached to any individual electronically transferable instances of a work and even if such value was to be attached there are no mechanisms in place to reflect the changes of such value due to market forces exerted by trading.
All of the above described methods of selling, auctioning and swapping are to various degree incompatible or purely inadequate to establish a trading exchange of electronically transferable instances of works in a manner similar to this practiced by New York Stock Exchange, Chicago Mercantile Exchange, Chicago Board of Options Exchange, etc. None of the above described methods allow to limit supply or create scarcity of electronically transferable instances of works in a manner that is trustworthy, reliable, enforceable, transparent to the interested parties, and employable by a trading exchange.